Strategic Management

Dr. Shyamal Gomes Chapter - 3

Strategic Intent and Environmental Scanning

Introduction:

“To know what a business is, we have to start with its purpose. Its purpose must lie outside of the business itself. For in fact, it must lie in society since business enterprise is an organ of society. There is only one valid definition of business purpose to create a customer”- Peter Drucker. When the stakeholders busy with some sorts of activities that return socio economic benefits and fulfill the needs of individual, the society and community, called Business. In a path Breaking analysis, Derek Abell define business along with 3 dimensions:

• Customer Groups • Customer Functions and • Alternative Technologies

Customer groups relate to ‘who’ is being satisfied, customer needs describe ‘what’ is being satisfied, and alternative technologies means ‘how’ the need is being satisfied.

Three Dimensions for defining a Business

CUSTOMER FUNCTIONS

CUSTOMER GROUPS

ALTERNATIVE

TECHNOLOGIES

Applying Abell’s 3 dimensional models to the illustration of time keeping business, we could identify the 3 dimensions as follows: 1. Customers groups individual customers and industrial

users 2. Customer functions are of finding time, recording time,

using watches as a fashionable access org., and as a gift item.

3. Alternative technologies are of the mechanical, quartz digital, and quartz analog types.

Like Strategy, business could either be defined at the corporate or SBU – levels. A single business firm is active in just one area so its business definition is simple. A large conglomerate, operating its several business, would have a separate business definition for each of its business. At the corporate level, the business definition will concern itself with the wider meaning of customer group, customer functions and alternative technologies. A highly diversified company organized on a individual basis could benefit by having a business definition covering all the three dimensions. Defining Business at MODI XEROX. ‘ Modi Xerox is closely following the Rank Xerox (its collaborator) strategy of pitching itself as a service organization rather than a vendor of machines of which there are plenty in India’, says B.M.Modi, the MD. Based on the analysis of Modi Xerox’s activities, we could identify the following 3 dimensions of its business definition:

1. Customer groups are individual organizations government department and the expert market

2. Customer function is to provide communication with ease of production

3. Technology is of high quality and the latest available from Rank Xerox of the US.

The actions taken by the company in implementing its business definition are: 1. Customer Groups: Providing office communication, both by more efficient and high priced 1045, and appropriate and low priced 1025 models; marketing schemes like full-service maintenance agreement, duplicating price plans, and a major accounts strategy for renting machines.

2. Customer functions: Providing high and medium quality photocopiers; local availability of spare parts like drams, and critical consumer able items like toner and developer; and good after sales services support.

3. Technology: Heavy investments in high tech manufacturing facilities, high quality manpower and customer services staff.

(Sources: Adapted from “ Modi Xerox” the service angle, up date no. 15-28, 1986, pp 44-48

Strategic Intent and Introduction to Vision and Mission, its difference and Importance in Strategic Management Strategic Intent is the foundation for SMP of any organization. It is a hierarchy of the vision, values, mission, business definitions and objectives are established. It makes clear : - what an organization stands for and - what an organization wishes to achieve in the long run. For any business (Small / Big or for any successful organization based on some specific ambitious or aim. This may be expressed in terms of a hierarchy or Strategic Intent in Strategic Management.

Broadly stated this could be:

• Strategic Intent is the foundation for SM of any organization. It is an hierarchy.

• In this hierarchy, the vision, mission, business definitions and objectives are established.

• It makes clear what an organization stands for and what an organization wishes to achieve in the long run.

• In the form of Vision and mission statement for the organization as a corporate whole

• This could be expressed as the business definition at the business level of a firm.

• This may be the goals and objectives in a precise term.

Hamel and Prahalad explain the term strategic Intent: On the one hand, S.I envisions a desired leadership position and establishes the criterion the organization will use to chart its progress ……… At the same time, SI is more than simply unfettered ambition ……… The concept also encompasses an active management process that includes:

• Focusing the organization’s attention on the essence of winning

• Motivating people by communicating the value of the target

• Leaving room for individual and team contributions (Team Participation)

• Sustaining enthusiasm by providing new operational definitions as circumstances changes and using intent consistently to guide resource allocations.

Therefore, overall, strategic intent points to what a firm should set out to achieve. The understanding of strategic intent we can see the living example in the following:

Indian Oil Corporation (IOC) is the only Indian company to feature in the fortune 500 lists. It owns 40% of India’s total refining capacity, commands a 55% market share of all petroleum products sold in the country, and achieves a revenue of Rs. 70,000 crore in 1998-99. Yet it is also a company that is apprehensive of the situation that will arise when the Indian oil sector is fully deregulated by 2002 Its major problem area is that it does not have any presence in oil exploration and production, as it is totally dependent on the ONGC for the supply of

crude oil. To prepare itself for surviving in the future, IOC has enunciated its strategic intent through – its vision – mission – objectives and strategies. IOC’S Vision: “Indian oil aims to achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through quality products and services “. IOC’S Mission: ‘Maintaining national leadership in oil refining, marketing, and pipeline transportation’. IOC’S Objectives: “Focusing on cost, quality, customer care, value addition and risk management”. IOC’s Corporate Strategies: “Expansion and diversification and integration through strategic alliance and joint ventures”. IOC’s Business strategies: Harnessing new business opportunities in petrochemicals, power and tube marketing.

IOC’s Functional strategies: Focusing on R & D , training and consultancy, exploration and production, LNG and fuel management in India and abroad.

Global Leadership

National level leadership

Quality Management and value addition

Expansion and diversification

Opportunity identification and selection

HRD / Capacity Building Source: I.Ghosh, ‘Prescription: Paranoia”, Business India, June 28-July 11, 1998,PP 68-77, and on the way to the top: An interview with M.A. Pathan Chairman IOC “ The Financial express, 30/8/99. A vision therefore, articulates the position that a firm would like to attain the distance future. It is the future aspirations that lead to an inspiration to be the best in one’s field of activity. According to Miller and Dass (1996) Vision is “ category of intensions that are broad, all inclusive, and forward thinking”. Now what is Mission? Mission is also known as vision, value statement, principles and credo, is the pivor around which corporate strategy revolves. Mission is a statement which defines the role that an organization plays in a society – (Azhar Kazmi –

understanding Mission: Business Policy and Strategic Management). Therefore, the ultimate comparison between Vision and Mission are:

Vision Mission • A dream of an

entrepreneur / Promoter

• An ultimate goal or destiny

• A guide map for distance future

• A mantra that inspiring and exhilarating the entire organization

• Essential purpose of the organization

• Concerning particularly why it is inexistence

• The nature of the business (es) it is in,

• The customers it seeks to serve and satisfy - Thompson 1997

While the essence of vision is a forward-looking view of what an organization wishes to becomes, mission is what an organization is and why it’s exists. What is Mission Statement? Process of developing a mission Statement? According to Fred David, a mission statement reveals the long-term vision of an organization in terms of what it wants to be and whom it wants to serve. It describes an organization’s purpose, customers, products or services, markets, philosophy and basic technology. Mission Statement provides directions on the strategic choice in diversification strategies Functions of Mission Statement: Mc. Ginnis pointed out that a mission statement:

• Should define what the organization is and what the organization aspires to be.

• Should be limited enough to exclude some ventures and broad enough to allow for creative growth.

• Should distinguish a given organization from all others

• Should serve as a framework for evaluating both current and prospective activities.

• Should be stated in terms sufficiently clear to be widely understood through out the organization.

Therefore an ideal mission statement of business should define its customers, products or services, markets, technology, philosophy and self-concept. Components of a Mission Statement:

♦ Customers – who are the firm’s customers? ♦ Product or services – what are the firm’s major

products or services? ♦ Markets – Geographically, where does the firm

compete? ♦ Technology – Is the firm technologically current? ♦ Concern for survival, growth and profitability –

I s the firm committed to growth and financial soundness?

♦ Philosophy – what are the basic beliefs, values, aspirations and ethical priorities of the firm?

♦ Self Concept – what is the firm’s distinctive competence or major competitive advantage?

♦ Concern for Public Image – Is the firm responsive to social, community, and environmental concerns?

♦ Concern for employees – Are the employees a valuable asset of the firm

On the basis of a review of the literature, Romould Stone suggests that effective mission statement must be:

1. Clearly articulated – easy to understand for every one.

2. Relevant – related to our cultures and values 3. Current – relevant to the current need of the

society 4. Written in a positive (Inspiring) tone –

motivating tool 5. Unique 6. Enduring 7. Adapted to the target audience.

Here is an illustration of Mission Statement – which is clearly articulated, relevant, current, inspiring, unique, enduring with adapted to the target audience:

MISSION STATEMENT : Indian Oil Corporation

• To achieve international standards of excellence in petroleum refining, marketing and transportation with concern for customer satisfaction

• To create a modern technology base for self- reliance, growth and development of the business

• To contribute to the national economy by providing adequate return on investment by setting high standards of leadership in productivity and total quality.

• To foster culture of participation and innovation for employee’s growth and contribution.

• To help enrich quality of life of the community and presence ecological balance and national heritage.

• NOCIL will be a world-class innovative customer – oriented chemical company with sound business values and ethics, having enduring commitment to safety and environmental standards.

MISSION STATEMENT: Tata Iron and Steel

Company:

• To seize the opportunities of tomorrow and create a future that will make us an economic value added positive company.

• To continue to improve the quality of life of our employees and the communities we serve.

• Revitalize the core business for a sustainable future. • Venture into a new business that will won a share of

our future. • Uphold the spirit and values of TATA,s towards nation

building Now the example have been given above to substantiate various points does not mean that mission. Many mission statement, however, are not so comprehensive. There are two schools of thoughts:

A) Strategy School: mission is terms of business strategy (like what business the company should be in)

B) Ethics School: Mission is the cultural bind that holds and out let together. It talks about generating, cooperation among employees through shared values and standards of behavior.

Therefore, it is well examined that to arrive at its mission of any organization following questions need to be answered:

1. What is the basic purpose of your organization? 2. What is unique about your organization? 3. What is likely to be different about your business five

years down the roads? 4. What is in your company that will make it stand out

in a crowd? 5. Who are, and who should be, your principal

customers? 6. What are and what should be, your principal

economic concerns? 7. What are the basic beliefs, values and Philosophical

priorities of your firm? Process of developing a mission Statement: In many cases the founder’s establish the vision, which may more, dreamt of than it is articulated. Some times it

could be as hazy and vague as a dream that one experienced the previous night and is not able to recall perfectly in broad daylight. Yet it is a powerful tool to actions. Many cases the MS drawn up by CEO and BOD or a committee constituted for those purpose. Engaging consultants for drawing up of mission is not uncommon. Many companies hold Brainstorming session of seniors executives to develop mission statement. Soliciting employees views is also common. Therefore, different organization followed different methods for preparing the mission statement step by step that lead to organization to reach the objectives: 1. Consultative – Participative route (Apple Industries):

♦ Meeting amongst Sr. management team for evolves the vision statement and after.

♦ Calling suggestions from employees 2. Mission – workshop (Mohindra and Mohindra):

♦ With in the organization at two levels - members of the corporate planners / planning groups

♦ And members of the business level members where corporate planning groups act as facilitators.

3. Series of Discussion ( Satyam Computers) ♦ With joint venture companies ♦ Overseas clients

In these brainstorming sessions the primary agenda is specific. As Drucker’s suggests 3 fundamental questions would help to clearly define / redefine the business and formulate / reformulated the mission. These questions are:

1. What is our Business? 2. What will our business be? 3. What should our business be?

To identify the qualitative answers, the process follows: Recollect

the Past Analyze

the Present

Visualize the Future

Considering the Vision of Business

In quite a few cases, the vision – mission statements get handed down. Thus, for instance, Thomas Cook says, ‘our is a worldwide mission statement applicable to all our units the world over complied after getting feedback from employees world over’. At Taparia Magnetics ‘ the value systems and the determination to be the no.1 player in the field of activity is ingrained for many years’. At Indals, the vision statement emerged after deliberations amongst 70 of Indal’s leaders. It was then translated, carried and explained to the entire company. The BT – Gallop MBA Survey has found that well over one fifth of the companies have engaged consultants and employee’s views were engaged consultants and employees views were solicited in case of more than 90% of the companies. This survey also reveals that the mission is communicated to the employees through – purposive meetings, notice board, company’s newsletters, conversation, other meetings, letters and badges The terms vision, mission, objectives, goals and targets are used many a time interchangeably. However, in corporate literature they are often used distinctively. Vision leads to mission, mission leads to objectives (Which are designed to achieve the mission), objectives lead to goals (which are designed to achieve the

objectives) and goals lead to targets (which are set to achieve the Goals).

Vision

Mission

Objectives

Goals

Targets

Concept and Commitment

Result

Action / Strategies

F O M U L A T I O N

A C H I E V E M E N T S

Mission : a combination of vision, entrepreneurship and professionalism ( Dherubhai Ambani) Objective: Those ends / results which the organization seeks to achieve by its existence and operations. (SMART – Specific, Measurable, Achievable, Realistic and Time bound) Goals: an intermediate result to be achieved by a certain time as a part of the grand plan. A plan can, therefore, have many goals. Target: To achieve the goals in a plan, an action or a strategic action could be defined as target. Actually, objective is the end result and it may be defined as the long-term results that an organization seeks to achieve in pursuing its basic mission. Goals are short term (one year or less) milestones. Or benchmarks that organization must achieve in order for longer-term objectives. Goals should be: MQCRCP

• MEASURABLE • QUANTITATIVE • CHALLENGING

• REALISTIC • CONSISTENT • PRIORITIZED

They should be established at the corporate, divisional and functional levels in a large organization. Goals are specifically important in strategy implementation, where as objectives are particularly important in strategy formulation. Goals represent the basis for allocating resources. Value to Managers ♦ Enables management to identify the boundary

between what to do and what not to do. ♦ Crystallizes top management views of the firms long

term directions ♦ Help managers take decisions to keep the

organization on the right track. ♦ Convey organizational purpose as motivation to

employees to do their very best ♦ Helps to keep direction related actions at all levels in

the organization as a common path. ♦ Gives a yardstick to measure the performance and

plans, against the aspirations Conclusion: Finally, every organization has a unique purpose and reason for being. This uniqueness should be reflected in vision and mission statements. The nature of a business vision and mission can represent either a competitive advantage or disadvantage for the firm. A good mission statement reveals an org’s customers; product or services, markets; technology, concern for public image; and concern for employees.